The domestic medical devices industry seems to be facing a double whammy .On the one hand, the industry -which offers cardiac stents, electro-cardiograms, ultrasound machines, heart valves and newborn screening kits -is facing an onslaught of low-priced Chinese imports. On the other, it is being beaten by restrictive conditions on “perceived quality“ in government and institutional tenders for procurement of these medical devices and electronics.
The impact on domestic companies seems to be defeating the purpose of pet initiatives of the Prime Minister -`Make In India’ and `Startup India’ -as many manufacturing units are on the verge of closure without government procurement, industry experts say.
The medical tech and devices industry has doubled from Rs 31,900 crore in 2013-14 to over Rs 60,000 crore in 2016, with nearly 80% being imported, according to estimates by Association of Indian Medical Device Industry (AIMED). With this huge influx of imports, domestic companies are reeling under the threat of Chinese manufacturers who are dumping products that are 30-40% cheaper. The industry -which makes ultrasound equipment, patient monitors, ICU ventilators, chemistry analysers and reagents to even syringes -is being hit by Chinese imports.Even for small items like syringes, prices of imported ones from China have been dropping over last couple of years.
Data shows 30-odd medical devices are facing stiff competition from cheap Chinese imports. The imports account for anywhere from 5% to even 95% of that segment. Certain diagnostic, ophthalmic surgical instruments, and instruments for measuring blood pressure and magnetic resonance imaging apparatus were impacted the most (see chart). While gloves, glucometers, ultrasound machines, newborn screening kits & instruments, ELISA & CLIA equipment & reagents, orthopaedic implants, heart valves and cardiac stents are losing out to imports from the US.
Says Rajiv Nath, forum coordinator, AIMED, “Indian manufacturers are caught in the middle. For many government orders, they are unable to even bid as tender specifications are designed to suit US bidders by having a mandatory US FDAapproved compliance clause which many Indian manufacturers may not have, so they lose out on perceived quality deficiency . On the other hand, they lose out to cheap low-priced Chinese imports, which are backed by Chinese govern ment subsidies. The government needs to come out with a clearly-defined preference purchase policy for `Made in India’ products based on indigenous content.“
Many companies are forced to lower prices to compete with the imported product, which stands a better chance to win the lowest offer (L1) in a government tender, which is usually unremunerative. “Chinese medical devices companies get government subsidies for exports and this makes Indian manufacturers’ products expensive. Hence, an anti-dumping duty on selected category of Chinese products will ensure a level-playing field,“ says G S K Velu, chairman and managing director at Trivitron gro up, which manufactures newborn-screening devices, in-vitro diagnostics reagents and ultrasound machines.
“MNCs use financial muscle to prevent entry of domestic med tech companies by inserting restrictive clauses like US FDA approval, three years’ market standing with a sizeable turnover, restrictive lock-in specifications, etc. This is clearly in contrast to what happens in countries like China, Brazil, Turkey and Malaysia where the domestic industry gets substantial incentives,“ he said, adding the government should promote a `Buy Indian’ policy , which gives 20% price preference in tenders to them, and 10% to MNCs.
Says Utkarsh Palnitkar, national head of infrastructure, government & healthcare and life sciences practice at KPMG in India, “Innovate in India must go hand in hand with `Make in India’. In recent times, we have seen a number of startups focused on medical devices with products tailored to unique and challenging Indian conditions. The ability to come up with such indigenous technology , which stands the test of global quality norms, is the way to derive a competitive advantage.“